Statutes > Illinois Statutes > CHAPTER 215 INSURANCE > 215 ILCS 5/ Illinois Insurance Code. > Article IX - Provisions Applicable To All Companies

Article IX - Provisions Applicable To All Companies


      (215 ILCS 5/Art. IX heading)
ARTICLE IX. PROVISIONS APPLICABLE TO ALL COMPANIES

    (215 ILCS 5/132) (from Ch. 73, par. 744)
    Sec. 132. Market conduct and non‑financial examinations.
    (1) The Director, for the purposes of ascertaining the non‑financial business practices, performance, and operations of any company, may make examinations of:
        (a) any company transacting or being organized to
     transact business in this State;
        (b) any person engaged in or proposing to be engaged
     in the organization, promotion, or solicitation of shares or capital contributions to or aiding in the formation of a company;
        (c) any person having a contract, written or oral,
     pertaining to the management or control of a company as general agent, managing agent, or attorney‑in‑fact;
        (d) any licensed or registered producer, firm, or
     administrator, or any person, organization, or corporation making application for any licenses or registration;
        (e) any person engaged in the business of adjusting
     losses or financing premiums; or
        (f) any person, organization, trust, or corporation
     having custody or control of information reasonably related to the operation, performance, or conduct of a company or person subject to the jurisdiction of the Director.
    (2) Every company or person being examined and its officers, directors, and agents must provide to the Director convenient and free access at all reasonable hours at its office or location to all books, records, documents, and any or all papers relating to the business, performance, operations, and affairs of the company. The officers, directors, and agents of the company or person must facilitate the examination and aid in the examination so far as it is in their power to do so.
    The Director and any authorized examiner have the power to administer oaths and examine under oath any person relative to the business of the company being examined.
    (3) The examiners designated by the Director under Section 402 must make a full and true report of every examination made by them, which contains only facts ascertained from the books, papers, records, or documents, and other evidence obtained by investigation and examined by them or ascertained from the testimony of officers or agents or other persons examined under oath concerning the business, affairs, conduct, and performance of the company or person. The report of examination must be verified by the oath of the examiner in charge thereof, and when so verified is prima facie evidence in any action or proceeding in the name of the State against the company, its officers, or agents upon the facts stated therein.
    (4) The Director must notify the company or person made the subject of any examination hereunder of the contents of the verified examination report before filing it and making the report public of any matters relating thereto, and must afford the company or person an opportunity to demand a hearing with reference to the facts and other evidence therein contained.
    The company or person may request a hearing within 10 days after receipt of the examination report by giving the Director written notice of that request, together with a statement of its objections. The Director must then conduct a hearing in accordance with Sections 402 and 403. He must issue a written order based upon the examination report and upon the hearing within 90 days after the report is filed or within 90 days after the hearing.
    If the examination reveals that the company is operating in violation of any law, regulation, or prior order, the Director in the written order may require the company or person to take any action he considers necessary or appropriate in accordance with the report of examination or any hearing thereon. The order is subject to judicial review under the Administrative Review Law. The Director may withhold any report from public inspection for such time as he may deem proper and may, after filing the same, publish any part or all of the report as he considers to be in the interest of the public, in one or more newspapers in this State, without expense to the company.
    (5) Any company which or person who violates or aids and abets any violation of a written order issued under this Section shall be guilty of a business offense and may be fined not more than $5,000. The penalty shall be paid into the General Revenue fund of the State of Illinois.
(Source: P.A. 87‑108.)

    (215 ILCS 5/132.1) (from Ch. 73, par. 744.1)
    Sec. 132.1. Purpose. The purpose of Sections 132.1 through 132.7 of this Code is to provide an effective system for the financial examination of the activities, operations, financial condition, and affairs of all persons transacting the business of insurance in this State and all persons otherwise subject to the jurisdiction of the Director. The provisions are intended to enable the Director to adopt a flexible system of examinations that directs resources as may be deemed appropriate and necessary for the administration of the insurance and insurance related laws of this State.
(Source: P.A. 87‑108.)

    (215 ILCS 5/132.2) (from Ch. 73, par. 744.2)
    Sec. 132.2. Definitions. As used in Sections 132.1 through 132.7, the terms set forth in this Section have the following meanings:
    "Company" means any person engaging in or proposing or attempting to engage in any transaction or kind of insurance or surety business and any person or group of persons who may otherwise be subject to the administrative, regulatory, or taxing authority of the Director.
    "Examiner" means any individual or firm having been authorized by the Director to conduct an examination under this Code.
    "Insurer" means any company licensed or authorized by the Director to provide any insurance contracts, whether by indemnity, guaranty, suretyship, or otherwise; including, but not limited to, those companies licensed or authorized by the Director under the following Acts:
        (1) The Voluntary Health Services Plans Act.
        (2) (Blank).
        (3) The Dental Service Plan Act.
        (4) (Blank).
        (5) The Farm Mutual Insurance Company Act of 1986.
        (6) The Limited Health Service Organization Act.
        (7) The Health Maintenance Organization Act.
    "Person" means any individual, aggregation of individuals, trust, association, partnership, or corporation, or any affiliate thereof.
(Source: P.A. 90‑372, eff. 7‑1‑98; 90‑655, eff. 7‑30‑98.)

    (215 ILCS 5/132.3) (from Ch. 73, par. 744.3)
    Sec. 132.3. Authority, scope, and scheduling of examinations.
    (a) The Director or any of his examiners may conduct an examination of any company as often as the Director, in his sole discretion, deems appropriate, but shall, at a minimum, conduct an examination of every insurer authorized or licensed in this State not less frequently than once every 5 years. In scheduling and determining the nature, scope, and frequency of the examinations, the Director shall consider the results of financial statement analyses and ratios, changes in management or ownership, actuarial opinions, reports of independent certified public accountants and other criteria set forth in the Examiners' Handbook adopted by the National Association of Insurance Commissioners and in effect when the Director exercises discretion under this subsection.
    (b) For purposes of completing an examination of any company, the Director may examine or investigate any person, or the business of any person, insofar as the examination or investigation is, in the sole discretion of the Director, necessary or material to the examination of the company.
    (c) In lieu of an examination of any foreign or alien insurer authorized or licensed in this State, the Director may accept an examination report on the company as prepared by the insurance department for the company's state of domicile or port‑of‑entry state until January 1, 1994. Thereafter, those reports may only be accepted if (1) the insurance department was at the time of the examination accredited under the National Association of Insurance Commissioners' Financial Regulation Standards and Accreditation Program, (2) the examination is performed under the supervision of an accredited insurance department or with the participation of one or more examiners who are employed by an accredited state insurance department, and who, after a review of the examination work papers and report, state under oath that the examination was performed in a manner consistent with the standards and procedures required by their insurance department, or (3) the Director otherwise determines that the examination was performed in a manner substantially similar to the standards and procedures required by Sections 132.1 through 132.6 of this Code.
(Source: P.A. 89‑97, eff. 7‑7‑95.)

    (215 ILCS 5/132.4) (from Ch. 73, par. 744.4)
    Sec. 132.4. Conduct of examinations.
    (a) Upon determining that an examination should be conducted, the Director or his designee shall issue an examination warrant appointing one or more examiners to perform the examination and instructing them as to the scope of the examination. In conducting the examination, the examiner shall observe those guidelines and procedures set forth in the Examiners' Handbook adopted by the National Association of Insurance Commissioners. The Director may also employ other guidelines or procedures as the Director may deem appropriate.
    (b) Every company or person from whom information is sought and its officers, directors, and agents must provide to the examiners appointed under subsection (a) timely, convenient, and free access, at all reasonable hours at its offices, to all books, records, accounts, papers, documents, and any or all computer or other recordings relating to the property, assets, business, and affairs of the company being examined. The officers, directors, employees, and agents of the company or person must facilitate the examination and aid in the examination so far as it is in their power to do so. The refusal of any company or its officers, directors, employees, and agents to submit to examination or to comply with any reasonable written request of the examiners shall be grounds for suspension, refusal, or nonrenewal of any license or authority held by the company to engage in an insurance or other business subject to the Director's jurisdiction. Any proceedings for suspension, revocation, or refusal of any license or authority shall be conducted under the procedures set forth in Section 401.1 of this Code. Evidence of refusal to submit to examination or to comply with reasonable written requests of examiners shall establish a rebuttable presumption that the conduct of the company's business and affairs is hazardous to its policyholders and the public and may cause irreparable loss and injury to others so long as the refusal to submit or to comply with the examination continues.
    (c) The Director or any of his examiners shall have the power to issue subpoenas, to administer oaths, and to examine under oath any person as to any matter pertinent to the examination. Subpoenas may be enforced under the provisions of Section 403 of this Code.
    (d) When making an examination, the Director may retain, in consultation with the company being examined, attorneys, appraisers, independent actuaries, independent certified public accountants, or other professionals and specialists as examiners, the cost of which shall be borne by the company that is the subject of the examination.
    (e) Nothing contained in this Act shall be construed to limit the Director's authority to terminate or suspend any examination in order to pursue other legal or regulatory action under the insurance laws of this State. Findings of fact and conclusions made in the course of any examination shall be prima facie evidence in any legal or regulatory action.
    (f) Nothing contained in this Code shall be construed to limit the Director's authority to use and, if appropriate, to make public any final or preliminary examination report, any examiner or company work papers or other documents, or any other information discovered or developed during the course of any examination in the furtherance of any legal or regulatory action that the Director may, in his sole discretion, deem appropriate.
(Source: P.A. 87‑108.)

    (215 ILCS 5/132.5) (from Ch. 73, par. 744.5)
    Sec. 132.5. Examination reports.
    (a) General description. All examination reports shall be comprised of only facts appearing upon the books, records, or other documents of the company, its agents, or other persons examined or as ascertained from the testimony of its officers, agents, or other persons examined concerning its affairs and the conclusions and recommendations as the examiners find reasonably warranted from those facts.
    (b) Filing of examination report. No later than 60 days following completion of the examination, the examiner in charge shall file with the Department a verified written report of examination under oath. Upon receipt of the verified report, the Department shall transmit the report to the company examined, together with a notice that affords the company examined a reasonable opportunity of not more than 30 days to make a written submission or rebuttal with respect to any matters contained in the examination report.
    (c) Adoption of the report on examination. Within 30 days of the end of the period allowed for the receipt of written submissions or rebuttals, the Director shall fully consider and review the report, together with any written submissions or rebuttals and any relevant portions of the examiners work papers and enter an order:
        (1) Adopting the examination report as filed or with
     modification or corrections. If the examination report reveals that the company is operating in violation of any law, regulation, or prior order of the Director, the Director may order the company to take any action the Director considers necessary and appropriate to cure the violation.
        (2) Rejecting the examination report with directions
     to the examiners to reopen the examination for purposes of obtaining additional data, documentation, or information and refiling under subsection (b).
        (3) Calling for an investigatory hearing with no
     less than 20 days notice to the company for purposes of obtaining additional documentation, data, information, and testimony.
    (d) Order and procedures. All orders entered under paragraph (1) of subsection (c) shall be accompanied by findings and conclusions resulting from the Director's consideration and review of the examination report, relevant examiner work papers, and any written submissions or rebuttals. The order shall be considered a final administrative decision and may be appealed in accordance with the Administrative Review Law. The order shall be served upon the company by certified mail, together with a copy of the adopted examination report. Within 30 days of the issuance of the adopted report, the company shall file affidavits executed by each of its directors stating under oath that they have received a copy of the adopted report and related orders.
    Any hearing conducted under paragraph (3) of subsection (c) by the Director or an authorized representative shall be conducted as a nonadversarial confidential investigatory proceeding as necessary for the resolution of any inconsistencies, discrepancies, or disputed issues apparent upon the face of the filed examination report or raised by or as a result of the Director's review of relevant work papers or by the written submission or rebuttal of the company. Within 20 days of the conclusion of any hearing, the Director shall enter an order under paragraph (1) of subsection (c).
    The Director shall not appoint an examiner as an authorized representative to conduct the hearing. The hearing shall proceed expeditiously with discovery by the company limited to the examiner's work papers that tend to substantiate any assertions set forth in any written submission or rebuttal. The Director or his representative may issue subpoenas for the attendance of any witnesses or the production of any documents deemed relevant to the investigation, whether under the control of the Department, the company, or other persons. The documents produced shall be included in the record, and testimony taken by the Director or his representative shall be under oath and preserved for the record. Nothing contained in this Section shall require the Department to disclose any information or records that would indicate or show the existence or content of any investigation or activity of a criminal justice agency.
    The hearing shall proceed with the Director or his representative posing questions to the persons subpoenaed. Thereafter the company and the Department may present testimony relevant to the investigation. Cross‑examination shall be conducted only by the Director or his representative. The company and the Department shall be permitted to make closing statements and may be represented by counsel of their choice.
    (e) Publication and use. Upon the adoption of the examination report under paragraph (1) of subsection (c), the Director shall continue to hold the content of the examination report as private and confidential information for a period of 35 days, except to the extent provided in subsection (b). Thereafter, the Director may open the report for public inspection so long as no court of competent jurisdiction has stayed its publication.
    Nothing contained in this Code shall prevent or be construed as prohibiting the Director from disclosing the content of an examination report, preliminary examination report or results, or any matter relating thereto, to the insurance department of any other state or country or to law enforcement officials of this or any other state or agency of the federal government at any time, so long as the agency or office receiving the report or matters relating thereto agrees in writing to hold it confidential and in a manner consistent with this Code.
    In the event the Director determines that regulatory action is appropriate as a result of any examination, he may initiate any proceedings or actions as provided by law.
    (f) Confidentiality of ancillary information. All working papers, recorded information, documents, and copies thereof produced by, obtained by, or disclosed to the Director or any other person in the course of any examination must be given confidential treatment, are not subject to subpoena, and may not be made public by the Director or any other persons, except to the extent provided in subsection (e). Access may also be granted to the National Association of Insurance Commissioners. Those parties must agree in writing before receiving the information to provide to it the same confidential treatment as required by this Section, unless the prior written consent of the company to which it pertains has been obtained.
(Source: P.A. 87‑108.)

    (215 ILCS 5/132.6) (from Ch. 73, par. 744.6)
    Sec. 132.6. Conflict of interest.
    (a) No examiner may be appointed by the Director if that examiner, either directly or indirectly, has a conflict of interest, is affiliated with the management of, or owns a pecuniary interest in any person subject to examination. This Section shall not be construed to automatically preclude an examiner from being:
        (1) A policyholder or claimant under an insurance
     policy.
        (2) A grantor of a mortgage or similar instrument on
     the examiner's residence to a regulated entity if done under customary terms and in the ordinary course of business.
        (3) An investment owner in shares of regulated
     diversified investment companies.
        (4) A settlor or beneficiary of a "blind trust" into
     which any otherwise impermissible holdings have been placed.
    (b) Notwithstanding the provisions of this Section, the Director may retain from time to time, on an individual basis, qualified actuaries, certified public accountants, or other similar individuals who are independently practicing their professions, even though those persons may from time to time be similarly employed or retained by persons subject to examination under this Code.
(Source: P.A. 87‑108.)

    (215 ILCS 5/132.7) (from Ch. 73, par. 744.7)
    Sec. 132.7. Immunity from liability.
    (a) No cause of action shall arise nor shall any liability be imposed against the Director, the Director's authorized representatives, or any examiner appointed by the Director for any statements made or conduct performed in good faith while carrying out the provisions of this Code.
    (b) No cause of action shall arise, nor shall any liability be imposed against any person for the act of communicating or delivering information or data to the Director or the Director's authorized representative or examiner in the course of an examination if the act of communication or delivery was performed in good faith and without fraudulent intent or the intent to deceive.
    (c) This Section does not abrogate or modify in any way any common law or statutory privilege or immunity heretofore enjoyed by any person identified in subsection (a).
    (d) Persons identified in subsection (a) shall be entitled to an award of attorney's fees and costs if they are a prevailing party in a civil action for libel, slander, or any other relevant tort arising out of their activities in carrying out the provisions of this Code and the party bringing the action was not substantially justified in doing so. For purposes of this Section a proceeding is "substantially justified" if it has a reasonable basis in law or fact at the time that it was initiated.
(Source: P.A. 87‑108.)

    (215 ILCS 5/133) (from Ch. 73, par. 745)
    Sec. 133. Books, records, accounts and vouchers.
    (1) Every domestic company shall keep its books, records, documents, accounts and vouchers in such manner that its financial condition, affairs and operations can be ascertained and so that its financial statements filed with the Director can be readily verified and its compliance with the law determined and may cause any or all such books, records, documents, accounts and vouchers to be photographed or reproduced on film. Any such photographs, microphotographs, optical imaging, or film reproductions of any original books, records, documents, accounts and vouchers shall for all purposes be considered the same as the originals thereof and a transcript, exemplification or certified copy of any such photograph, microphotograph, optical imaging, or film reproduction shall for all purposes be deemed to be a transcript, exemplification or certified copy of the original. Any original so reproduced may thereafter be disposed of or destroyed if provision is made for preserving and examining such reproductions.
    (2) All such original books, records, documents, accounts and vouchers, or such reproductions thereof, of the home office of any domestic company or of any principal United States office of a foreign or alien company located in this State shall be preserved and kept available in this State for the purpose of examination and until authority to destroy or otherwise dispose of such records is secured from the Director. Such original records may, however, be kept and maintained outside this State if, according to a plan adopted by the company's board of directors and approved by the Director, it maintains suitable records in lieu thereof. Every domestic company shall keep its securities within the State of Illinois except where:
        (a) on deposit with other states of the United
     States of America, or political subdivision thereof; or
        (b) on deposit with foreign countries where the
     company is licensed to transact an insurance business; or
        (c) where requisite for the normal transaction of
     the company's business and approved by the Director.
    (3) Any domestic company may maintain with a corporation, qualified to administer trusts in this State under the Corporate Fiduciary Act and that has an office in this State at which the account is maintained, for its securities, a limited agency, custodial or depository account, or other type of account for the safekeeping of those securities, collecting the income from those securities and providing supportive accounting services relating to such safekeeping and collection, provided, the domestic company maintains full investment discretion over those securities. Such a corporation in safekeeping such securities shall have all the powers, rights, duties and responsibilities as it has for holding securities in its fiduciary accounts under the Securities in Fiduciary Accounts Act.
    (4) Any director, officer, agent or employee of any company who destroys any such books, records or documents without the authority of the Director in violation of this section or who fails to keep the books, records, documents, accounts and vouchers required by this section shall be guilty of a business offense and shall be fined not more than $5000.00.
(Source: P.A. 88‑364; 89‑437, eff. 12‑15‑95.)

    (215 ILCS 5/134) (from Ch. 73, par. 746)
    Sec. 134. Falsification of Records‑Sentence.
    Any officer, director, agent or employee of any company who makes or causes to be made any false entry in any book, report or statement of such company with intent to injure or defraud such company, or any other company or person, or to deceive any officer of such company, or the Director or any agent or examiner appointed to examine the affairs of such company and any person who with like intent aids or abets any officer, director, agent or employee in any violation of this Section shall be guilty of a Class 4 felony.
(Source: P. A. 77‑2830.)

    (215 ILCS 5/136)(from Ch. 73, par. 748)
    Sec. 136. Annual statement.
    (1) Every company authorized to do business in this State or accredited by this State shall file with the Director by March 1st in each year 2 copies of its financial statement for the year ending December 31st immediately preceding on forms prescribed by the Director, which shall conform substantially to the form of statement adopted by the National Association of Insurance Commissioners. Unless the Director provides otherwise, the annual statement is to be prepared in accordance with the annual statement instructions and the Accounting Practices and Procedures Manual adopted by the National Association of Insurance Commissioners. The Director shall have power to make such modifications and additions in this form as he may deem desirable or necessary to ascertain the condition and affairs of the company. The Director shall have authority to extend the time for filing any statement by any company for reasons which he considers good and sufficient. In every statement the admitted assets shall be shown at the actual values as of the last day of the preceding year, in accordance with Section 126.7. The statement shall be verified by oaths of the president and secretary of the company or, in their absence, by 2 other principal officers. In addition, any company may be required by the Director, when he considers that action to be necessary and appropriate for the protection of policyholders, creditors, shareholders, or claimants, to file, within 60 days after mailing to the company a notice that such is required, a supplemental summary statement as of the last day of any calendar month occurring during the 100 days next preceding the mailing of such notice designated by him on forms prescribed and furnished by the Director. The Director may require supplemental summary statements to be certified by an independent actuary deemed competent by the Director or by an independent certified public accountant.
    (2) The statement of an alien company shall embrace only its condition and transactions in the United States and shall be verified by the oaths of its resident manager or principal representative in the United States, except that in the case of any life company organized under the laws of Canada or any province thereof, the statement may be verified by the oaths of any of its principal officers designated for that purpose by its board of directors.
    (3) For the information of the public generally the Director shall cause an abstract of the information contained in the annual statement to be made available to the public as soon as practicable after filing with the Department, by printing those abstracts in pamphlet tabular form for free general distribution by the Department, or by such other publication in the city of Springfield or in the city of Chicago as may be reasonably necessary more fully to inform the public of the financial condition of companies transacting business in this State.
    (4) Each domestic, foreign, and alien insurer authorized to do business in this State or accredited by this State shall participate in the National Association of Insurance Commissioners' Insurance Regulatory Information System, including the payment of all fees and charges of the system. Each company shall, on or before March 1 of each year, file with the National Association of Insurance Commissioners a copy of its annual financial statement along with any additional filings prescribed by the Director for the preceding year. The statement filed with the National Association of Insurance Commissioners shall be in the same format and scope as that required by this Code and shall include a signed jurat page and actuarial certification. Any amendments and addendums to the annual statement shall also be filed with the National Association of Insurance Commissioners. Each company shall also file with the National Association of Insurance Commissioners annual and quarterly financial statement information in computer readable format as required by the Insurance Regulatory Information System. Failure of a company to file financial statement information in computer readable format shall subject the company to the provisions of Section 139.
    (5) All financial analysis ratios and examination synopsis concerning insurance companies that are submitted to the Director by the National Association of Insurance Commissioners' Insurance Regulatory Information System are confidential and may not be disclosed by the Director.
    (6) Every property and casualty insurance company doing business in this State, unless otherwise exempted by the Director, shall annually submit the opinion of an appointed actuary entitled "Statement of Actuarial Opinion". This opinion shall be filed in accordance with the appropriate National Association of Insurance Commissioners Property and Casualty Annual Statement Instructions.
        (a) Every property and casualty insurance company
     domiciled in this State that is required to submit a Statement of Actuarial Opinion shall annually submit an Actuarial Opinion Summary, written by the company's appointed actuary. This Actuarial Opinion Summary shall be filed in accordance with the appropriate National Association of Insurance Commissioners Property and Casualty Annual Statement Instructions and shall be considered as a document supporting the Actuarial Opinion required in this subsection (6). Each foreign and alien property and casualty company authorized to do business in this State shall provide the Actuarial Opinion Summary upon request.
        (b) An Actuarial Report and underlying workpapers as
     required by the appropriate National Association of Insurance Commissioners Property and Casualty Annual Statement Instructions shall be prepared to support each Actuarial Opinion. If the insurance company fails to provide a supporting Actuarial Report or workpapers at the request of the Director or the Director determines that the supporting Actuarial Report or workpapers provided by the insurance company is otherwise unacceptable to the Director, the Director may engage a qualified actuary at the expense of the company to review the opinion and the basis for the opinion and prepare the supporting Actuarial Report or workpapers.
        (c) The appointed actuary shall not be liable for
     damages to any person (other than the insurance company and the Director) for any act, error, omission, decision, or conduct with respect to the actuary's opinion, except in cases of fraud or willful misconduct on the part of the appointed actuary.
        (d) The Statement of Actuarial Opinion shall be
     provided with the Annual Statement in accordance with the appropriate National Association of Insurance Commissioners Property and Casualty Annual Statement Instructions and shall be treated as a public document. Documents, materials, or other information in the possession or control of the Director that are considered an Actuarial Report, workpapers, or Actuarial Opinion Summary provided in support of the opinion, and any other material provided by the company to the Director in connection with the Actuarial Report, workpapers or Actuarial Opinion Summary, must be given confidential treatment, are not subject to subpoena, and may not be made public by the Director or any other persons. This paragraph (d) shall not be construed to limit the Director's authority t